A summer like no other. Here I am with the latest market recap (as at June 2020) in case you missed any of the noteworthy developments below (some personal commentary included):
Norway’s sovereign wealth fund, the largest in the world, with more than a trillion dollars in assets, announced a record $37 billion withdrawal in May. Norway is facing its worst economic slump since World War II and needed the cash to weather the economic crisis. The unprecedented withdrawal pales in comparison to the $180 billion in income the fund generated in 2019 (Fortune and CNBC).
The EU unveiled a 750 billion Euro recovery package on May 27 (largest stimulus package in Europe’s history) which some analysts are calling “too small and too late”. The funds will be financed by the issuance of bonds with maturities of 3 and 30 years. The package will allocate 20% each for hard-hit Italy and Spain. In comparison, France will receive 10% and Germany 7% (Business Insider).
Women leaders outshine their male counterparts in responding to the pandemic. Truth, decisiveness, use of technology, and love are some of the reasons why. Model behaviors include New Zealand’s Prime Minister, Jacinda Arden’s decisiveness to lockdown the country when there were only six reported cases. Sanna Marin of Finland (who happens to be the world’s youngest head of state) successfully rallied social media influencers to battle the pandemic by sharing fact based information (realizing that not everyone reads the news). Norway’s Erna Solberg used television to speak with children across Norway; responding to their questions, exhibiting empathy, and telling them its “OK to feel scared”. Germany, Iceland, and Taiwan are among some of the other countries led by women leaders who have led their countries with empathy, responsibility, and maturity through the crisis (Forbes). Dare to share this fact-checked news on Donald Trump’s Twitter feed?
Airlines are making temporary adjustments to adhere to social distancing guidelines. However, some adjustments might be here to stay – a design by French engineer Florian Barjot incapacitates the middle seat with a privacy screen (CNN). I suppose fighting for elbow space in economy class will be a thing of the past.
Core CPI, which removes volatile food and fuel costs from the picture, fell 0.4% in April – the biggest drop since record-keeping began in 1957. Experts warn the US Federal Reserve “should be worried about deflation” (CNBC). In Canada, inflation fell below zero for the first time since 2009 (BNN Bloomberg). Economies like Canada typically target a healthy annual inflation rate of 1 – 3 percent.
The United Nations World Tourism Organization expects global tourism to plunge by 70% this year compared to last year (CNN).
1.8 billion Muslims around the world celebrated Eid al-Fitr last weekend, a festive holiday that marks the end of the fasting month of Ramadan. Strict stay-at-home orders curtailed festivities in most Muslim countries where mosques were closed and families resorted to video calling for prayers and celebrations (CBC).
Hertz rental car service was incorporated in 1918, the year the Spanish flu pandemic proliferated the planet. Sadly, just over a hundred years later, another pandemic led the company to its bankruptcy.
Houseparty, the live video calling app that gained a record 50 million users in the month of March (70 times growth rate) has added a co-watching of live events feature. The company launched its first experiential event series, “in-the-house”, on May 15 that featured more than 40 celebrities on the platform (TechCrunch). The co-watching feature joins the family of co-watching features like Netflix Party and Twitch Watch Party.
In an unprecedented move, the Federal Reserve bought $305 million worth of ETFs to mark a historic intervention in the corporate world to further cushion the impact of the corona-virus. The mandate includes outright purchase of corporate bonds and sub-investment grade debt (BNN Bloomberg).
Retail sales plunged a record 16.4% in April. The dizzying nosedive in the retail sale figure is a result of stiff stay-at-home orders – economists had predicted a 12% plunge. Clothing sales plummeted by 78.8%, followed by electronics at -60.6%, and furniture at -58.7%. Despite the dismal numbers, Bank of America reported meaningful improvement in credit card activity in May amid distribution of stimulus checks and clearing backlog of unemployment insurance claims.
UN announced that global trade will fall by a record – wait-for-it: 27% (you can guess the reason why). The spectacular decline in trade has disrupted supply lines and the trickle down effects of the slowdown are starting to take shape across the world – the road to recovery will be long. But the stock markets don’t seem to care with the Dow, S&P, and Nasdaq ending the month of May in the green.
The Insurance sector has been roiled by the pandemic, reports Forbes. “Balance sheet losses, substantial shifts in costs and a changing appetite for risk among insurers is quickly changing the insurance industry landscape. The pandemic will ultimately affect the types of coverage available.” says Brian Duperreault, CEO of American International Group (AIG). AIG noted that the pandemic will serve as the single largest loss ever for the insurance industry.
In raw terms, “the world’s billionaires are worth $8 trillion, down $700 billion from 2019” reports Forbes (as at May 2020).
Amid the plummets and nosedives, the Saudis are going on a acquisition binge. The kingdom’s very active sovereign wealth fund, ‘The Public Investment Fund’, has scooped up sizable stakes in Boeing, Disney, and Facebook. And when I say sizable, I mean: $717.7 million in Boeing, $495.8 million in Disney, and $521.9 million in Facebook (Financial Times). The fund also holds sizable stakes in Marriott Hotels, Uber, Tesla, SoftBank’s Vision Fund, BP, and Berkshire Hathaway. “PIF is a patient investor with a long-term horizon” said PIF in an email statement to the press. While Saudi Arabia’s primary source of income tied to oil is at a crossroads, PIF’s tactical/strategic/whatever-you-want-to-call-it move in the equity markets amid COVID-19 could yield handsome returns if valuations improve as lock-downs are eased and economic activity starts to pick-up.
There is something about Canada’s fiscal discipline and resilience the world can learn from. In fact, following the Great Recession, which feels like a 100 years ago, the Bank of England courted Canada’s Mark Carney as its governor. Mark Carney was instrumental in helping Canada avoid a financial catastrophe in 2008 while the rest of the G8 teetered towards financial collapse. More recently, the CBC reported that Canada’s pension plan (CPP) added $17 billion to its asset base despite the pandemic – bringing the total asset base to $409 billion. The fund reported a 3.1% return for the financial year ending March 31. The performance is remarkable considering global markets were in free-fall during the same period. The Dow Jones in comparison lost 23% of its value during the first quarter of 2020 – its worst performance in its 135 year history. “Amid the significant number of concerns many Canadians have today, the sustainability of the fund is one thing they shouldn’t worry about. The fund’s long-term returns continue to help ensure the security of Canadians’ retirement benefits” CEO Mark Machin said. He also touted that the current climate presents many buying opportunities but the fund is not embarking on a buying spree. More on this on CBC.
Another notable plummet: industrial production – which plunged 11.2% in April (unprecedented). “Manufacturing output also posted a historic 13.7% drop as the production of cars, trucks and auto parts plummeted more than 70%” reports CNBC. US GDP’s drop from April – June will be the biggest on record since 1947, when record keeping for GDP figures began.
“Never bet against America” said Warren Buffet at Berkshire Hathaway’s recent shareholder’s meeting. But perhaps bet against Goldman? Buffett trimmed his holding in Wall Street’s most coveted banking institution by offloading a staggering 10 million shares. Buffett also exited his stake in US airlines. While the Saudis took major positions in equity markets, Warren Buffett maintained a cash balance of circa $137 billion. What will he buy I wonder. It better be big!
Donald Trump isn’t the only world leader making waves on Twitter. Canadian Prime Minister, Justin Trudeau, offered Canadian kids help with homework on mother’s day. Trudeau, a former school teacher, shared a warm video message offering his support to children. But the gesture backfired when some viewers compared him to Stalin, and criticized his vacation in 2016 at a billionaire’s island; while others called the backlash “sickening and despicable” – follow the link for some outlandish Tweet screenshots on Huffington Post. While mother’s day was celebrated on May 10 for many countries around the world; In France it falls on June 7, just an fyi.
Britain’s other great university has announced it will move all lectures online until summer 2021. Cambridge has become the first university to set such drastic measures as the university projects ‘social distancing measures would continue to be required’ (The Guardian).
“I’m a born-and-raised, do-or-die New Yorker because it was always a party,” said Giovanni Cassinelli, 44, a dog walker who was an acolyte of the late nightlife legend Willi Ninja, “but the party is over.” He’s heading to a mountain town in Nevada. “I’m not getting my city back,” he said. “So I’m leaving before it gets to the point that I can’t get my mind back.” Cassinelli represents multitudes of New Yorkers who are leaving the city in droves due to the pandemic (Washington Post). The post pandemic New York City may look and feel quite different – and that may hold true for many other downtown cities as well, Toronto included.
The post-American world is now on full display with America mostly nonexistent in the annual meeting of the World Heath Assembly – the general assembly of the WHO that took place in May and where China took the lead (Washington Post). As the specter of the China-US “cold war” unravels, one wonders what the post-COVID world would look like. I recently attended a webinar hosted by McGill University that invited speakers from major private equity firms and banks. One comment I heard about the world post-COVID was that countries may ‘pick sides on who should lead’. Some countries may look to China while others may look to the USA – creating a seismic shift in world leadership. Time will tell.
A pigeon from Pakistan has been taken into custody in India on charges of spying. The keeper of the pigeon has requested India’s Prime Minister to return his pigeon. Indian police identified a code the pigeon was carrying which they are trying to decipher. The keeper of the pigeon claims that the code is his mobile number. True story. More on BBC.
June 1st marks the start of hurricane season in the US and this season (that lasts till November), the National Oceanic and Atmospheric Administration expects 13 to 19 named storms to pummel the country’s coast. Last year, natural disasters cost the US $45 billion. The pandemic is exacerbating the complexity of managing natural disasters in the country (CNBC).
A bizarre landing attempt by a Pakistani pilot led to the tragic crash of PIA flight 8303 on May 22 that was carrying 99 people on board. The crash took place in a residential colony adjacent to the runway of Karachi international airport. Miraculously, two passengers survived. Investigation is underway to determine the cause of the crash; the plane’s landing gear did not engage on the pilot’s first landing attempt and instead the two engines scraped hard against the runway, damaging them completely (Gulf News).
You know the world is exhibiting some semblance of normalcy when the US President is busy attacking Twitter, and squabbles abound between India and China over some territory in the Himalayas. Reports by Indian forces suggest that the Chinese military dug trenches and moved heavy equipment inside Indian territory and the two titans engaged in skirmishes during the early part of May (BBC).
The US Space Force launched a secretive mission into space honoring pandemic workers and victims (NBC News). Did NASA find a planet free of viruses?
In conclusion:
So much record breaking news this year so far. But the best record the world can set for itself is to emerge a better, kinder, and more just place for humanity after this crisis is over. More on this in my Perspectives briefing (still working on it). Stay safe, exercise precaution, maybe share this blog with your friends, and soak up some sun!
References: Fortune, CBC, CNBC, Forbes, Business Insider, CNN, BNN Bloomberg, TechCrunch, UN, Financial Times, NBC News, Huffington Post, The Guardian, Washington Post, BBC, and Gulf News. Please note that this briefing contains paraphrased summaries and attributes the original content to the news sources. Readers are encouraged to visit the links to access the full article in its original form for a thorough and complete view. You may need to subscribe to the news agency and source for access.